BUSINESS SITUATION.

Moran, Larry R. ; Larkins, Daniel ; Morris, Ralph W. 等

GROWTH of the U.S. economy slowed in the third quarter, as private investment slowed sharply and Federal Government spending turned down. Inflation remained moderate.

Real gross domestic product (GDP) increased 2.4 percent in the third quarter of 2000, according to the "preliminary" estimates of the national income and product accounts (NIPA's), after increasing 5.6 percent in the second quarter (table 1 and chart 1); the "advance "third-quarter estimate of real GDP, reported in the November "Business Situation" had shown a 2.7-percent increase.(1) The downward revision to real GDP reflected an upward revision to imports and downward revisions to business investment in equipment and software and to private investment in inventories that were partly offset by upward revisions to business investment in structures and to State and local government spending.(2)

[Chart 1 OMITTED]

Table 1.--Real Gross Domestic Product, Real Gross Domestic Purchases, and Real Final Sales to Domestic Purchasers

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Change from
 preceding
 Level quarter

 2000 1999 2000

 III IV I II

Gross domestic product 9,373.5 178.3 107.7 127.1
Less: Exports of goods
 and services 1,162.7 25.8 16.4 37.0
Plus: Imports of goods
 and services 1,587.7 35.7 40.8 63.5
Equals: Gross domestic
 purchases 9,767.7 187.4 129.5 150.7
Less: Change in private
 inventories 73.5 41.8 -44.3 42.0
 Nonfarm 68.4 29.5 -40.0 39.3
 Farm 5.0 12.9 -4.3 2.6
Equals: Final sales to 9,688.1 147.6 169.5 110.6
 domestic purchasers
 Personal consumption
 expenditures 6,330.5 87.2 112.5 47.1
 Durable goods 904.1 25.6 46.4 -11.5
 Nondurable goods 1,883.1 32.0 26.7 16.3
 Services 3,558.7 31.9 44.2 39.5
 Private fixed
 investment 1,791.9 28.8 64.3 46.7
 Nonresidential 1,439.4 29.3 63.5 47.2
 Structures 286.8 6.0 13.4 3.0
 Equipment and 1,162.7 23.5 50.3 46.2
 software
 Residential 362.3 .5 2.9 1.2
Government consumption
 expenditures and 1,577.7 31.7 -4.4 18.6
 investment
 Federal 545.8 17.1 -21.0 21.7
 National defense 346.2 10.5 -19.4 13.6
 Nondefense 199.4 6.6 -1.7 8.2
 State and local 1,031.4 14.8 16.2 -2.8
Addendum: Final sales
 of domestic product 9,294.1 138.7 147.5 87.3

 Change from Percent change
 preceding from preceding
 quarter quarter

 2000 1999 2000

 IV I
 III

Gross domestic product 54.6 8.3 4.8
Less: Exports of goods
 and services 40.9 10.3 6.3
Plus: Imports of goods
 and services 62.5 10.7 12.0
Equals: Gross domestic
 purchases 73.4 8.4 5.6
Less: Change in private
 inventories -5.1 ... ...
 Nonfarm -3.9 ... ...
 Farm -1.2 ... ...
Equals: Final sales to 77.6 6.6 7.5
 domestic purchasers
 Personal consumption
 expenditures 69.9 5.9 7.6
 Durable goods 17.4 13.0 23.6
 Nondurable goods 22.0 7.4 6.0
 Services 32.0 3.8 5.2
 Private fixed
 investment 14.3 7.2 16.4
 Nonresidential 26.9 9.5 21.0
 Structures 9.8 9.7 22.3
 Equipment and 16.1 9.5 20.6
 software
 Residential -10.3 0.5 3.2
Government consumption
 expenditures and -6.0 8.5 -1.1
 investment
 Federal -13.0 13.2 -14.2
 National defense -8.9 12.6 -19.8
 Nondefense -4.2 14.4 -3.3
 State and local 6.8 6.1 6.6
Addendum: Final sales
 of domestic product 58.8 6.4 6.7

 Percent change from
 preceding quarter

 2000

 II III

Gross domestic product 5.6 2.4
Less: Exports of goods
 and services 14.3 15.4
Plus: Imports of goods
 and services 18.6 17.4
Equals: Gross domestic
 purchases 6.5 3.1
Less: Change in private
 inventories
 Nonfarm
 Farm
Equals: Final sales to 4.7 3.3
 domestic purchasers
 Personal consumption
 expenditures 3.1 4.5
 Durable goods -5.0 8.1
 Nondurable goods 3.6 4.8
 Services 4.6 3.7
 Private fixed
 investment 11.2 3.3
 Nonresidential 14.6 7.8
 Structures 4.4 14.9
 Equipment and 17.9 5.8
 software
 Residential 1.3 -10.5
Government consumption
 expenditures and 4.8 -1.5
 investment
 Federal 17.2 -9.0
 National defense 16.9 -9.6
 Nondefense 17.8 -8.0
 State and local -1.1 2.7
Addendum: Final sales
 of domestic product 3.9 2.6

NOTE.--Chained (1996) dollar series are calculated as the product of the chain-type quantity index and the 1996 current-dollar value of the corresponding series, divided by 100. Because the formula for the chain-type quantity indexes uses weights of more than one period, the corresponding chained-dollar estimates usually are not additive. Chained (1996) dollar levels and residuals, which measure the extent of nonadditivity In each table, are shown in NIPA tables 1.2, 1.4, and 1.6. Percent changes are calculated from unrounded data. Percent changes In major aggregates are shown in NIPA table S.1. (See "Selected NIPA Tables," which begin on page D-2 in this issue.)

Real final sales of domestic product was revised down, and real gross domestic purchases was revised up. The increases in the prices of gross domestic purchases and of GDP were revised down. (The sources of the revisions are discussed in the section "Revisions.")

The 2.4-percent increase in real GDP in the third quarter was the smallest increase in 4 years and was well below the 3.7-percent average annual growth rate over the current expansion, which began in the second quarter of 1991.

Overall, the picture of the economy that is presented by the preliminary estimates is similar to that presented by the advance estimates; however, revisions to some of the components of GDP were substantial and offsetting. The preliminary estimates showed the following:

* Real GDP growth decelerated in the third quarter. The deceleration was accounted for by downturns in private inventory investment, in Federal Government spending, and in private residential investment and by a deceleration in business investment in equipment and software. These changes were partly offset by an acceleration in consumer spending and by an upturn in State and local government spending.(3)

* Real motor vehicle output decreased 16.4 percent in the third quarter after decreasing 4.5 percent in the second. GDP less motor vehicles increased 3.1 percent after increasing 6.0 percent.

* Real final sales of computers increased 37.7 percent in the third quarter after increasing 55.4 percent in the second. GDP less final sales of computers increased 2.0 percent after increasing 5.2 percent.

* Real final sales of domestic product decelerated less than GDP in the third quarter, as private inventory investment turned down.(4) The growth in real final sales of domestic product was 0.2 percentage point higher than the growth in real GDP in the third quarter; in the second quarter, the growth in final sales was 1.7 percentage points lower than the growth in real GDP.

* Real gross domestic purchases decelerated slightly more than real GDP in the third quarter, reflecting a small deceleration in imports of goods and services and a small acceleration in exports of goods and services.(5) Gross domestic purchases has grown faster than GDP for 7 consecutive quarters and for 14 of the past 15 quarters.

* The largest contributors to the third-quarter increase in real GDP were consumer spending, exports of goods and services, and business fixed investment (table 2 and chart 1). The increase in GDP was moderated by an increase in imports.

Table 2.--Contributions to Percent Change in Real Gross Domestic Product

[Seasonally adjusted at annual rates]

 1999 2000

 IV I II III
Percent change at annual rate:
 Gross domestic product 8.3 4.8 5.6 2.4
Percentage points at annual
 rates:
 Personal consumption
 expenditures 4.08 5.03 2.14 3.02
 Durable goods 1.04 1.79 -.42 .64
 Nondurable goods 1.47 1.19 .74 .95
 Services 1.58 2.04 1.83 1.43
 Gross private domestic
 investment 3.04 .92 3.66 .40
 Fixed investment 1.26 2.68 1.93 .58
 Nonresidential 1.22 2.54 1.87 1.04
 Structures .29 .63 .14 .45
 Equipment and software .94 1.91 1.73 .59
 Residential .03 .14 .06 -.46
 Change in private
 inventories 1.78 -1.76 1.73 -.18
 Net exports of goods and
 services -.37 -.94 -1.00 -.79
 Exports 1.09 .67 1.48 1.60
 Goods .94 .46 1.37 1.46
 Services .15 .21 .11 .15
 Imports -1.45 -1.61 -2.48 -2.39
 Goods -1.28 -1.28 -2.26 -1.95
 Services -.17 -.33 -.22 -.44
 Government consumption
 expenditures and gross
 investment 1.50 -.18 .85 -.26
 Federal .79 -.93 .97 -.57
 National defense .48 -.86 .60 -.38
 Nondefense .30 -.07 .37 -.19
 State and local .71 .75 -.12 .31

NOTE.--More detailed contributions to percent change in real gross domestic product are shown in NIPA table 8.2. Contributions to percent change in major components of real gross domestic product are shown in tables 8.3 through 8.6.

The prices of gross domestic purchases increased 2.3 percent in the third quarter after increasing 2.1 percent in the second (table 3); the small acceleration was primarily accounted for by an acceleration in the prices of PCE services, largely in medical care. The prices of gross domestic purchases excluding food and energy prices, which are more volatile than many other prices, increased 1.8 percent after increasing 1.7 percent.

Table 3.--Percent Changes in Prices

[Annual rates, based on seasonally adjusted index numbers (1996=100)]

 1999 2000

 IV I II III

Gross domestic product 1.6 3.3 2.4 1.9
Less: Exports of goods and services 2.7 1.9 1.9 .8
Plus: Imports of goods and services 5.3 5.6 .2 3.6
Equals: Gross domestic purchases 1.9 3.8 2.1 2.3
Less: Change in private inventories
Equals: Final sales to domestic 2.0 3.8 2.1 2.3
 purchasers
 Personal consumption expenditures 2.2 3.5 2.1 2.1
 Durable goods -1.8 -2.0 -.6 -2.3
 Nondurable goods 3.6 5.4 3.3 2.2
 Services 2.3 3.7 2.0 3.0
 Private fixed investment 0 2.8 1.9 2.3
 Nonresidential -.8 1.8 1.6 2.2
 Structures 3.6 4.7 3.7 4.9
 Equipment and software -2.1 .9 1.0 1.3
 Residential 2.6 5.2 2.6 2.7
 Government consumption
 expenditures and gross
 investment 3.0 6.4 2.7 3.2
 Federal 2.2 7.7 .6 2.7
 National defense 2.4 7.1 .8 2.9
 Nondefense 1.9 8.9 .4 2.4
 State and local 3.5 5.7 3.8 3.4

Addenda:
 Gross domestic purchases:
 Food 2.3 2.3 2.3 3.5
 Energy 12.0 37.7 11.2 11.1
 Less food and energy 1.5 2.8 1.7 1.8
 PCE:
 Food 2.3 2.4 2.3 3.7
 Energy goods and services(1) 11.7 35.1 13.0 8.7
 Less food and energy 1.7 2.2 1.4 1.5

(1.) Consists of gasoline, fuel oil, and other energy goods, and of electricity and gas.

NOTE.--Percent changes in major aggregates are shown in NIPA table 8.1. Index numbers are shown in tables 7.1, 7.2, and 7.4.

GDP prices increased 1.9 percent in the third quarter after increasing 2.4 percent in the second. GDP prices decelerated while gross domestic purchases prices accelerated, because export prices decelerated and import prices accelerated; the acceleration in import prices primarily reflected a sharp step-up in petroleum prices.

Real disposable personal income increased 2.4 percent in the third quarter after increasing 3.7 percent in the second. The personal saving rate fell to -0.2 percent in the third-quarter from 0.3 percent in the second; the third-quarter rate was the only negative rate since 1946--the first year for which quarterly estimates are available.(6) The national saving rate decreased to 18.5 percent from 18.6 percent; the national saving rate has ranged from 18.2 percent to 18.6 percent for the last six quarters after ranging from 18.7 percent to 19.0 percent for the preceding five quarters.(7)

Personal consumption expenditures

Real personal consumption expenditures (PCE) increased 4.5 percent in the third quarter after increasing 3.1 percent in the second (table 4 and chart 2). The acceleration was accounted for by an upturn in durable goods and by an acceleration in nondurable goods. Services decelerated.

[Chart 2 OMITTED]

Table 4.--Real Personal Consumption Expenditures

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Change from
 Level preceding quarter

 2000 1999 2000

 III IV I

Personal consumption expenditures 6,330.5 87.2 112.5
 Durable goods 904.1 25.6 46.4
 Motor vehicles and parts 342.3 6.0 20.9
 Of which:
 New autos 101.3 5.1 5.6
 New light trucks 107.6 .2 10.3
 Furniture and household equipment 387.6 14.3 15.9
 Other 177.9 6.0 9.1
 Nondurable goods 1,883.1 32.0 26.7
 Food 879.2 19.3 6.2
 Clothing and shoes 350.4 0 15.6
 Gasoline, fuel oil, and other 149.2 1.9 -5.7
 energy goods
 Other 506.5 10.2 11.9
 Services 3,558.7 31.9 44.2
 Housing 851.8 5.8 4.9
 Household operation 376.4 -5.4 5.4
 Electricity and gas 135.1 -7.8 2.3
 Other household operation 241.1 2.1 3.2
 Transportation 250.9 2.3 2.5
 Medical care 909.8 7.2 4.6
 Recreation 237.0 2.1 5.1
 Other 931.5 19.1 21.3

 Change from Percent
 preceding change
 quarter from
 preceding
 quarter

 2000 1999

 II III IV

Personal consumption expenditures 47.1 69.9 5.9
 Durable goods -11.5 17.4 13.0
 Motor vehicles and parts -15.9 6.4 7.7
 Of which:
 New autos -3.7 -4.0 22.4
 New light trucks -7.8 7.0 .9
 Furniture and household equipment 5.2 8.3 17.7
 Other 1.0 2.9 15.8
 Nondurable goods 16.3 22.0 7.4
 Food 4.3 2.7 9.4
 Clothing and shoes 4.6 8.1 -.1
 Gasoline, fuel oil, and other 1.7 1.7 5.1
 energy goods
 Other 5.9 10.0 9.0
 Services 39.5 32.0 3.8
 Housing 5.6 4.8 2.8
 Household operation 10.1 1.6 -5.8
 Electricity and gas 6.5 -1.4 -20.9
 Other household operation 3.7 3.0 3.8
 Transportation 2.4 1.0 3.7
 Medical care 6.4 6.0 3.3
 Recreation 4.9 4.8 3.9
 Other 10.6 13.5 9.1

 Percent change from
 preceding quarter

 2000

 I II III

Personal consumption expenditures 7.6 3.1 4.5
 Durable goods 23.6 -5.0 8.1
 Motor vehicles and parts 27.7 -16.9 7.8
 Of which:
 New autos 23.6 -13.0 -14.4
 New light trucks 49.2 -25.7 30.7
 Furniture and household equipment 19.1 5.6 9.0
 Other 24.1 2.3 6.9
 Nondurable goods 6.0 3.6 4.8
 Food 2.9 2.0 1.2
 Clothing and shoes 20.9 5.6 9.8
 Gasoline, fuel oil, and other -14.0 4.5 4.7
 energy goods
 Other 10.3 4.9 8.3
 Services 5.2 4.6 3.7
 Housing 2.4 2.7 2.3
 Household operation 6.1 11.6 1.8
 Electricity and gas 7.2 21.4 -3.9
 Other household operation 5.6 6.4 5.2
 Transportation 4.2 3.9 1.6
 Medical care 2.1 2.9 2.7
 Recreation 9.6 9.0 8.6
 Other 9.9 4.8 6.0

NOTE.--See note to table 1 for an explanation of chained (1996) dollar series. Chained (1996) dollar levels and residuals are shown in NIPA tables 2.3 and 8.9B (motor vehicles). Percent changes in major aggregates are shown in NIPA table S.1.

Over the past four quarters, PCE increased 5.3 percent, well above its 3.8-percent average annual growth rate over the current expansion. The factors frequently considered in the analyses of consumer spending showed some strength from the third quarter of 1999 to the third quarter of 2000 (chart 3). The unemployment rate fell to 4.0 percent--its lowest quarterly rate since 1969--from 4.2 percent. Real disposable personal income increased 3.1 percent, which was slightly higher than the 2.9-percent average growth rate over the current expansion. The Index of Consumer Sentiment (prepared by the University of Michigan's Survey Research Center as a measure of consumer attitudes and expectations) decreased in three of the four quarters, but it remained at a high level.

[Chart 3 OMITTED]

Expenditures for durable goods increased 8.1 percent after decreasing 5.0 percent. The upturn was mostly accounted for by an upturn in motor vehicles and parts. However, furniture and household equipment and "other" durable goods increased more than in the second quarter.(8)

Expenditures for nondurable goods increased 4.8 percent after increasing 3.6 percent. Accelerations in "other" nondurable goods and in clothing and shoes more than offset a deceleration in food.(9)

Expenditures for services increased 3.7 percent after increasing 4.6 percent. A deceleration in household operation, largely reflecting a downturn in electricity and gas, more than offset an acceleration in "other" services.(10)

Private fixed investment

Real private fixed investment increased 3.3 percent in the third quarter after jumping 11.2 percent in the second (table 5 and chart 4). Nonresidential fixed investment decelerated, and residential investment turned down.

[Chart 4 OMITTED]

Table 5.--Real Private Fixed Investment

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Level Change from
 preceding quarter

 2000 1999 2000

 III IV I

Private fixed investment 1,791.9 28.8 64.3
 Nonresidential 1,439.4 29.3 63.5
 Structures 286.8 6.0 13.4
 Nonresidential buildings, 204.0 1.9 11.4
 including farm
 Utilities 44.8 0.4 .9
 Mining exploration, shafts, 30.5 3.3 1.5
 and wells
 Other structures 7.7 .4 -.6
 Equipment and software 1,162.7 23.5 50.3
 Information processing 696.1 26.8 41.5
 equipment and software
 Computers and peripheral 322.9 12.9 20.3
 equipment
 Software 235.2 12.8 9.7
 Other 197.5 3.5 15.7
 Industrial equipment 167.8 3.9 6.1
 Transportation equipment 190.5 -3.2 1.4
 Of which: Motor vehicles 154.4 -3.6 4.4
 Other 139.9 -.5 5.2
 Residential 362.3 .5 2.9
 Structures 352.7 .4 2.6
 Single-family 185.1 3.2 7.0
 Multifamily 21.6 -.3 .8
 Other structures 146.0 -2.6 -5.5
 Equipment 9.8 .1 .4

 Billions of chained
 (1996) dollars Percent
 change from
 Change from preceding
 preceding quarter quarter

 2000 1999

 II III IV

Private fixed investment 46.7 14.3 7.2
 Nonresidential 47.2 26.9 9.5
 Structures 30.0 9.8 9.7
 Nonresidential buildings, 3.0 4.5 4.0
 including farm
 Utilities -2.1 2.0 3.9
 Mining exploration, shafts, 2.3 2.1 78.2
 and wells
 Other structures -.4 1.2 22.0
 Equipment and software 46.2 16.1 9.5
 Information processing 39.7 27.0 20.5
 equipment and software
 Computers and peripheral 33.2 25.6 24.2
 equipment
 Software 9.5 10.7 29.3
 Other 9.3 .9 8.7
 Industrial equipment 5.1 3.8 10.8
 Transportation equipment 1.9 -8.7 -6.3
 Of which: Motor vehicles -8.0 -4.4 -8.4
 Other 3.4 -1.5 -1.4
 Residential 1.2 -10.3 .5
 Structures 1.1 -10.2 .4
 Single-family -2.3 -8.4 7.1
 Multifamily -.2 -2.0 -5.1
 Other structures 3.7 .3 6.7
 Equipment 0 .1 6.8

 Percent change from preceding
 quarter

 2000

 I II III

Private fixed investment 16.4 11.2 3.3
 Nonresidential 21.0 14.6 7.8
 Structures 22.3 4.4 14.9
 Nonresidential buildings, 27.1 6.2 9.4
 including farm
 Utilities 8.6 -17.4 19.8
 Mining exploration, shafts, 27.0 40.9 33.2
 and wells
 Other structures -27.2 -24.3 99.0
 Equipment and software 20.6 17.9 5.8
 Information processing 31.4 27.7 17.1
 equipment and software
 Computers and peripheral 37.8 60.5 39.2
 equipment
 Software 20.3 18.9 20.4
 Other 41.9 21.4 1.8
 Industrial equipment 16.9 13.5 9.6
 Transportation equipment 2.9 3.9 -16.4
 Of which: Motor vehicles 11.4 -17.8 -10.7
 Other 16.6 10.2 -4.4
 Residential 3.2 1.3 -10.5
 Structures 2.9 1.3 -10.8
 Single-family 15.6 -4.5 -16.3
 Multifamily 14.7 -2.5 -29.5
 Other structures -13.9 10.6 1.0
 Equipment 16.4 1.9 1.7

(1.) Includes new computers and peripheral equipment only.

(2.) Excludes software "embedded," or bundled, in computers and other equipment.

(3.) Other structures includes home improvements, new manufactured home sales, brokers' commissions on home sales, net purchases of used structures, and other residential structures (which consists primarily of dormitories and of fraternity and sorority houses).

NOTE.--See note to table 1 for an explanation of chained (1996) dollar series, Chained (1996) dollar levels and residuals are shown in NIPA tables 5.5 and 8.9B (motor vehicles). Percent changes in major aggregates are shown in NIPA table S.1.

Nonresidential fixed investment. -- Real private nonresidential fixed investment increased 7.8 percent in the third quarter after jumping 14.6 percent in the second. The deceleration reflected a deceleration in equipment and software that more than offset an acceleration in structures.

Over the past four quarters, nonresidential fixed investment increased 13.1 percent, somewhat more than its 9.3-percent average annual growth rate over the current expansion. Many of the factors that affect investment spending have shown strength over the past four quarters: Real final sales of domestic product increased 4.9 percent, domestic corporate profits increased 13.9 percent, and the capacity utilization rate increased to 82.4 percent from 81.3 percent (chart 5). In contrast, long-term interest rates increased; for example, the yield on high-grade corporate bonds increased to 7.54 percent in the third quarter of 2000 from 7.31 percent in the third quarter of 1999.

[Chart 5 OMITTED]

Investment in equipment and software increased 5.8 percent in the third quarter after jumping 17.9 percent in the second. The slowdown was widespread, but it was most pronounced in transportation equipment and in "other" information processing equipment.(11)

Investment in nonresidential structures jumped 14.9 percent after increasing 4.4 percent. The step-up was accounted for by upturns in Utilities and in "other structures" and by an acceleration in nonresidential buildings.

Residential investment.--Real private residential investment decreased 10.5 percent in the third quarter after increasing 1.3 percent in the second (table 5 and chart 4). All the components of residential structures contributed to the downturn.

Single-family structures decreased 16.3 percent after decreasing 4.5 percent, and multifamily structures decreased 29.5 percent after decreasing 2.5 percent.

"Other" residential structures increased 1.0 percent after increasing 10.6 percent.(12) The deceleration resulted from a sharp slowdown in brokers' commissions on home sales, which reflected a slowdown in existing home sales that occurred despite a decrease in the commitment rate on 30-year, fixed-rate mortgages from 8.3 percent to 7.9 percent.

Inventory investment

Real inventory investment decreased $5.1 billion in the third quarter, as inventory accumulation stepped down to $73.5 billion from $78.6 billion. Inventory investment had increased $42.0 billion in the second quarter (table 6 and chart 6).

[Chart 6 OMITTED]

Table 6.--Real Change in Private Inventories

[Billions of chained (1996) dollars; seasonally adjusted at annual rates]

 Level

 1999 2000

 III IV I II III

Change in private 39.1 80.9 36.6 78.6 73.5
 inventories
 Farm -5.0 7.9 3.6 6.2 5.0
 Nonfarm 43.5 73.0 33.0 72.3 68.4
 Manufacturing 3.5 7.6 10.3 17.6 21.0
 Durable goods 3.3 3.3 6.5 11.3 15.9
 Nondurable goods .2 4.2 3.8 6.4 5.3
 Wholesale trade 23.0 18.5 21.5 32.5 25.8
 Durable goods 12.5 15.2 17.3 23.8 13.3
 Nondurable goods 10.5 3.4 4.4 8.9 12.3
 Retail trade 15.7 41.7 -4.4 21.5 17.9
 Durable goods 13.0 27.7 -3.6 16.0 14.0
 Of which: Motor
 vehicle dealers 9.7 14.7 -6.4 9.7 10.0
 Nondurable goods 2.9 14.2 -.8 5.7 4.1
 Other 1.1 4.2 6.1 .9 4.0
 Durable goods -.3 1.9 1.3 -1.5 .1
 Nondurable goods 1.4 2.2 4.8 2.5 3.8
Addenda:
 Motor vehicles 9.1 14.4 -2.0 14.7 6.4
 Autos 1.8 4.7 .4 2.3 8.9
 Trucks 6.8 9.1 -2.1 11.2 -1.8

 Change from preceding quarter

 1999 2000

 IV I II III

Change in private 41.8 -44.3 42.0 -5.1
 inventories
 Farm 12.9 -4.3 2.6 -1.2
 Nonfarm 29.5 -40.0 39.3 -3.9
 Manufacturing 4.1 2.7 7.3 3.4
 Durable goods 0 3.2 4.8 4.6
 Nondurable goods 4.0 -.4 2.6 -1.1
 Wholesale trade -4.5 3.0 11.0 -6.7
 Durable goods 2.7 2.1 6.5 -10.5
 Nondurable goods -7.1 1.0 4.5 3.4
 Retail trade 26.0 -46.1 25.9 -3.6
 Durable goods 14.7 -31.3 19.6 -2.0
 Of which: Motor
 vehicle dealers 5.0 -21.1 16.1 .3
 Nondurable goods 11.3 -15.0 6.5 -1.6
 Other 3.1 1.9 -5.2 3.1
 Durable goods 2.2 -.6 -2.8 1.6
 Nondurable goods .8 2.6 -2.3 1.3
Addenda:
 Motor vehicles 5.3 -16.4 16.7 -8.3
 Autos 2.9 -4.3 1.9 6.6
 Trucks 2.3 -11.2 13.3 -13.0

NOTE.--See note to table 1 for an explanation of chained (1996) dollar series. Chained (1996) dollar levels and residuals are shown in NIPA tables 5.11 and 8.9B (motor vehicles).

The third-quarter decrease in inventory investment reflected decreases of $6.7 billion for wholesale trade, of $3.6 billion for retail trade, and of $1.2 billion for farm. These decreases were partly offset by increases of $3.4 billion for manufacturing and of $3.1 billion for "other" nonfarm industries.(13)

The stock of wholesale trade inventories increased $25.8 billion after increasing $32.5 billion. Inventories of merchant wholesalers increased $18.8 billion after increasing $28.9 billion; the slowdown was accounted for by durable goods, notably by motor vehicles and by machinery equipment.

The stock of retail trade inventories increased $17.9 billion after increasing $21.5 billion. Inventories of durable-goods retailers increased $14.0 billion after increasing $16.0 billion; the small slowdown was more than accounted for by inventories of furniture and furnishings stores. Inventories of nondurable-goods retailers increased $4.1 billion after increasing $5.7 billion.

Farm inventories increased $5.0 billion after increasing $6.2 billion. Crop inventories increased less than in the second quarter, and livestock inventories decreased more.

The stock of manufacturing inventories increased $21.0 billion after increasing $17.6 billion. Inventories of durable-goods manufacturers increased $15.9 billion after increasing $11.3 billion; inventories of transportation equipment manufacturers (especially of aircraft manufacturers) decreased less than in the second quarter, and inventories of industrial-machinery manufacturers increased more than in the second quarter. Inventories of nondurable-goods manufacturers increased $5.3 billion after increasing $6.4 billion; inventories of petroleum refiners turned down.

"Other" nonfarm inventories increased $4.0 billion after increasing $0.9 billion.

The ratio of real private nonfarm inventories to real final sales of domestic businesses increased to 2.08 in the third quarter from 2.07 in the second and 2.06 in the first; the inventory-sales ratio that includes only final sales of goods and structures increased to 3.61 from 3.60 in the second quarter and 3.57 in the first (see NIPA table 5.13).(14) The first-quarter levels of both ratios were the lowest since 1966.

Exports and imports

Real exports of goods and services increased 15.4 percent in the third quarter after increasing 14.3 percent in the second; exports of both goods and services accelerated (table 7). Real imports of goods and services increased 17.4 percent after increasing 18.6 percent; imports of goods decelerated, and imports of services accelerated.

Table 7.--Real Exports and Imports of Goods and Services

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Level Change from
 preceding quarter

 2000 1999 2000

 III IV I

Exports of goods and services 1,162.7 25.8 16.4
 Exports of goods 872.1 23.1 11.6
 Foods, feeds, and beverages 64.7 -1.4 1.0
 Industrial supplies
 and materials 173.4 7.3 1.3
 Capital goods, except
 automotive 415.5 7.8 2.8
 Automotive vehicles,
 engines, and parts 78.8 -.2 2.6
 Consumer goods, except
 automotive 90.6 2.7 3.5
 Other 51.2 6.3 .1
 Exports of services(1) 294.4 3.2 4.8
Imports of goods and services 1,587.7 35.7 40.8
 Imports of goods(1) 1,365.4 32.0 32.8
 Foods, feeds, and beverages 51.1 .3 -.1
 Industrial supplies and
 materials, except
 petroleum and products 170.1 5.5 2.0
 Petroleum and products 86.9 -7.6 5.2
 Capital goods, except
 automotive 481.5 16.8 13.9
 Automotive vehicles,
 engines, and parts 199.7 1.0 4.9
 Consumer goods, except
 automotive 292.6 9.5 8.7
 Other 92.3 8.3 -2.0
 Imports of services(1) 224.7 3.9 7.8

 Change from Percent
 preceding quarter change from
 quarter preceding
 quarter

 2000 1999

 II III IV

Exports of goods and services 37.0 40.9 10.3
 Exports of goods 35.4 38.6 12.6
 Foods, feeds, and beverages -.5 5.8 -8.8
 Industrial supplies
 and materials 3.7 8.0 20.5
 Capital goods, except
 automotive 34.3 20.0 9.2
 Automotive vehicles,
 engines, and parts -.4 .6 -.9
 Consumer goods, except
 automotive 1.2 2.8 14.1
 Other -1.7 2.2 70.7
 Exports of services(1) 2.5 3.4 4.6
Imports of goods and services 63.5 62.5 10.7
 Imports of goods(1) 58.6 51.5 11.2
 Foods, feeds, and beverages 1.5 2.3 2.6
 Industrial supplies and
 materials, except
 petroleum and products -1.3 4.7 14.6
 Petroleum and products 6.5 -1.3 -31.5
 Capital goods, except
 automotive 33.7 27.9 18.3
 Automotive vehicles,
 engines, and parts 1.4 7.7 2.2
 Consumer goods, except
 automotive 17.7 4.4 16.0
 Other 2.0 10.1 53.2
 Imports of services(1) 5.3 11.0 8.2

 Percent change from preceding
 quarter

 2000

 I II III

Exports of goods and services 6.3 14.3 15.4
 Exports of goods 6.0 19.0 19.8
 Foods, feeds, and beverages 6.4 -3.3 45.7
 Industrial supplies
 and materials 3.5 9.4 20.8
 Capital goods, except
 automotive 3.2 43.6 21.9
 Automotive vehicles,
 engines, and parts 14.3 -2.1 3.0
 Consumer goods, except
 automotive 17.9 5.7 13.7
 Other .7 -12.5 18.8
 Exports of services(1) 6.9 3.5 4.8
Imports of goods and services 12.0 18.6 17.4
 Imports of goods(1) 11.2 20.0 16.6
 Foods, feeds, and beverages -.3 13.0 20.0
 Industrial supplies and
 materials, except
 petroleum and products 4.9 -3.0 11.8
 Petroleum and products 30.3 35.3 -5.7
 Capital goods, except
 automotive 14.4 36.2 27.0
 Automotive vehicles,
 engines, and parts 11.1 3.1 16.9
 Consumer goods, except
 automotive 13.9 28.9 6.3
 Other -9.2 10.0 59.0
 Imports of services(1) 16.6 10.6 22.1

(1.) Exports and imports of certain goods, primarily military equipment purchased and sold by the Federal Government, are included in services.

NOTE.--See note to table 1 for an explanation of chained (1996) dollar series. Chained (1996) dollar levels and residuals are shown in NIPA table 4.4. Percent changes in major aggregates are shown in NiPA table S.1.

Exports of goods jumped 19.8 percent after jumping 19.0 percent (chart 7). A sharp slowdown in nonautomotive capital goods was more than offset by upturns in foods, feeds, and beverages, in "other" goods, and in automotive vehicles, engines, and parts and by accelerations in industrial supplies and materials and in nonautomotive consumer goods.

[Chart 7 OMITTED]

Exports of services increased 4.8 percent after increasing 3.5 percent. The acceleration was largely accounted for by upturns in travel and in passenger fares and by an acceleration in "other" private services.(15) In contrast, transfers under U.S. military agency sales contracts turned down, and royalties and license fees decelerated.

Imports of goods increased 16.6 percent after jumping 20.0 percent (chart 8). The slowdown was accounted for by decelerations in nonautomotive consumer goods and in nonautomotive capital goods and by a downturn in petroleum and products. In contrast, "other" goods and automotive vehicles, engines, and parts accelerated, and non-petroleum industrial supplies and materials turned up.

[Chart 8 OMITTED]

Imports of services jumped 22.1 percent after increasing 10.6 percent. The step-up was largely in royalties and license fees, reflecting payments for the rights to broadcast the 2000 Summer Olympic Games, and in "other" private services, partly reflecting an acceleration in financial services.

Government spending

Real government spending decreased 1.5 percent in the third quarter after increasing 4.8 percent in the second (table 8 and chart 9). A downturn in Federal Government spending more than offset an upturn in State and local government spending.

[Chart 9 OMITTED]

Table 8.--Real Government Consumption Expenditures and Gross Investment

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Level Change from
 preceding quarter

 2000 1999 2000

 III IV I

Government consumption
 expenditures and gross
 investment(1) 1,577.7 31.7 -4.4
 Federal 545.8 17.1 -21.0
 National defense 346.2 10.5 -19.4
 Consumption expenditures 290.6 9.9 -18.3
 Gross investment 56.0 0.6 -.9
 Nondefense 199.4 6.6 -1.7
 Consumption expenditures 151.9 2.1 1.1
 Gross investment 48.3 4.7 -3.1
 State and local 1,031.4 14.8 16.2
 Consumption expenditures 820.6 6.1 6.1
 Gross investment 211.0 8.9 10.3

 Change from
 preceding Percent change
 quarter from preceding
 quarter

 2000 1999

 II III IV

Government consumption
 expenditures and
 gross investment(1) 18.6 -6.0 8.5
 Federal 21.7 -13.0 13.2
 National defense 13.6 -8.9 12.6
 Consumption expenditures 12.7 -7.8 14.2
 Gross investment .7 -1.0 4.1
 Nondefense 8.2 -4.2 14.4
 Consumption expenditures 5.4 -3.5 6.0
 Gross investment 3.0 -.7 49.5
 State and local -2.8 6.8 6.1
 Consumption expenditures 5.3 5.5 3.1
 Gross investment -8.4 1.2 19.2

 Percent change from preceding
 quarter

 2000

 I II III

Government consumption
 expenditures and
 gross investment(1) -1.1 4.8 -1.5
 Federal -14.2 17.2 -9.0
 National defense -19.8 16.9 -9.6
 Consumption expenditures -22.0 19.0 -10.1
 Gross investment -6.1 5.4 -7.0
 Nondefense -3.3 17.8 -8.0
 Consumption expenditures 3.0 15.1 -8.8
 Gross investment -22.4 27.7 -5.4
 State and local 6.6 -1.1 2.7
 Consumption expenditures 3.1 2.6 2.8
 Gross investment 21.3 -14.5 2.4

(1.) Gross government investment consists of general government and government enterprise expenditures for fixed assets; inventory investment as included in government consumption expenditures.

NOTE.--See note to table 1 for an explanation of chained (1996) dollar series. Chained (1996) dollar levels and residuals are shown in NIPA table 3.8. Percent changes in major aggregates are shown in NIPA table S.1

Federal defense spending decreased 9.6 percent after increasing 16.9 percent. Consumption spending turned down, largely reflecting a downturn in "other services."(16) Investment also turned down, reflecting a downturn in equipment and software.

Federal nondefense spending decreased 8.0 percent after increasing 17.8 percent. Both consumption spending and investment spending turned down. Most of the downturn in consumption spending was in compensation of employees and reflected the departure of most of the temporary workers hired for Census 2000.

State and local government spending increased 2.7 percent after decreasing 1.1 percent. Investment spending turned up, largely reflecting structures, which decreased considerably less than in the second quarter. Consumption spending increased slightly more than in the second quarter.

Revisions

The preliminary estimate of a 2.4-percent increase in real GDP in the third quarter is 0.3 percentage point lower than the advance estimate (table 9); for 1978-99, the average revision, without regard to sign, from the advance estimate to the preliminary estimate was 0.5 percentage point.

Table 9.--Revisions to Change in Real Gross Domestic Product and Prices, Third Quarter 2000

[Seasonally adjusted at annual rates]

 Percent change
 from preceding
 quarter

 Prelimi-
 Advance nary
 estimate estimate

Gross domestic product 2.7 2.4
Less: Exports of goods and services 16.2 15.4
 Goods 20.6 19.8
 Services 5.4 4.8
Plus: Imports of goods and services 13.8 17.4
 Goods 13.0 16.6
 Services 18.9 22.1
Equals: Gross domestic purchases 2.9 3.1
Less Change in private inventories ... ...
 Farm ... ...
 Nonfarm ... ...
Equals: Final sales to domestic purchasers 2.8 3.3
 Personal consumption expenditures 4.5 4.5
 Durable goods 7.5 8.1
 Nondurable goods 4.9 4.8
 Services 3.7 3.7
 Fixed investment 2.9 3.3
 Nonresidential 6.9 7.8
 Structures 1.7 14.9
 Equipment and software 8.5 5.8
 Residential -9.2 -10.5
 Government consumption expenditures and
 gross investment -3.6 -1.5
 Federal -10.1 -9.0
 National defense -10.2 -9.6
 Nondefense -9.9 -8.0
 State and local 0 2.7
Addenda:
 Final sales of domestic product 2.7 2.6
 Gross domestic purchases price index 2.4 2.3
 GDP price index 2.0 1.9

 Preliminary esti-
 mate minus
 advance estimate

 Billions
 Percent- of
 age chained
 points (1996)
 dollars

Gross domestic product -0.3 -8.7
Less: Exports of goods and services -.8 -1.9
 Goods -.8 -1.5
 Services -.6 -.5
Plus: Imports of goods and services 3.6 12.2
 Goods 3.6 10.8
 Services 3.2 1.5
Equals: Gross domestic purchases .2 4.1
Less Change in private inventories -6.4
 Farm ... 0
 Nonfarm ... -6.5
Equals: Final sales to domestic purchasers .5 10.2
 Personal consumption expenditures 0 .1
 Durable goods .6 1.2
 Nondurable goods -.1 -.2
 Services 0 -.6
 Fixed investment .4 1.4
 Nonresidential .9 3.1
 Structures 13.2 8.6
 Equipment and software -2.7 -7.5
 Residential -1.3 -1.4
 Government consumption expenditures and
 gross investment 2.1 8.3
 Federal 1.1 1.6
 National defense .6 .5
 Nondefense 1.9 1.0
 State and local 2.7 6.8
Addenda:
 Final sales of domestic product -.1 -2.6
 Gross domestic purchases price index -.1 ...
 GDP price index -.1 ...

NOTE.--The preliminary estimates for the third quarter of 2000 incorporate the following revised or additional major source data that were not available when the advance estimates were prepared.

Personal consumption expenditures: Retail sales for August and September (revised), consumers' share of new-car purchases for September, average unit value for domestic new autos for September (revised), and consumers' share of new-truck purchases for September.

Nonresidential fixed investment: Construction put-in-place for July and August (revised) and September manufacturers' shipments of machinery and equipment for August (revised) and September, manufacturers' shipments of complete civilian aircraft for August (revised) and September; and exports and imports of machinery and equipment for August (revised) and September.

Residential fixed investment: Construction put-in-place for July and August (revised) and September.

Change in private inventories: Manufacturing and trade inventories for August (revised) and September.

Exports and imports of goods and services: Exports and imports of goods for August (revised) and September.

Government consumption expenditures and gross investment: Monthly Treasury Statement detailed data for September, Department of Defense detailed financial reports for the third quarter, and State and local government construction put-in-place for July and August (revised) and September.

Wages and salaries: Employment, average hourly earnings, and average weekly hours for August and September (revised).

GDP prices: Detailed merchandise export and import price indexes for July through September (revised) unit-value index for petroleum imports for September, and housing prices for the third quarter.

The major contributors to the 0.3-percentage point downward revision were imports (which contributed-0.46 percentage point), equipment and software (-0.28 percentage point), and change in private inventories (-0.26 percentage point). The negative contributions of those components were partly offset by positive contributions of nonresidential structures (0.39 percentage point) and State and local government spending (0.31 percentage point).

The upward revision to imports of goods primarily reflected the incorporation of newly available Census Bureau data on trade in goods for September and revised data for August.

The downward revision to private nonresidential investment in equipment and software primarily reflected the incorporation of newly available Census Bureau data on shipments for September and revised data for August.

The downward revision to private inventory investment primarily reflected the incorporation of newly available Census Bureau data on inventories for September and revised data for August and of newly available truck registration data from a trade source.

The upward revision to private nonresidential investment in structures reflected the incorporation of newly available Census Bureau data on construction put in place for September and revised data for July and August.

The upward revision to State and local government spending was to structures and reflected the incorporation of newly available Census Bureau data on construction put in place for September and revised data for July and August.

According to the preliminary estimates, real disposable personal income (DPI) increased 2.4 percent, and current-dollar DPI increased 4.6 percent; both estimates were 0.1 percentage point less than the advance estimates. Personal income was revised down slightly, and personal tax and nontax payments was revised little. The preliminary estimate of the personal saving rate was -0.2 percent, the same as the advance estimate.

Corporate Profits

In the third quarter, profits from current production increased $7.6 billion, or 0.8 percent at a quarterly rate, after increasing $27.3 billion, or 2.9 percent, in the second quarter (table 10).(17)

Table 10.--Corporate Profits

[Seasonally adjusted]
 Billions of dollars
 (annual rate)
 Change from
 preceding
 Level quarter

 2000 1999

 III IV

Profits from current production 971.2 51.2
 Domestic industries 831.8 42.6
 Financial 173.5 19.7
 Nonfinancial 658.3 22.9
 Rest of the world 139.4 8.6
 Receipts (inflows) 206.1 5.3
 Payments (outflows) 66.7 -3.3

 IVA -4.7 .5
 CCAdj 29.9 -1.1
 Profits before tax 946.0 51.7
 Profits tax liability 291.9 16.6
 Profits after tax 654.1 35.1

Cash flow from current production 1,029.1 34.8

Domestic industry profits:
 Corporate profits of domestic 801.9 43.6
 industries with IVA
 Financial 194.0 20.1
 Nonfinancial 607.9 23.6

 Dollars

Unit price, costs, and profits
 of nonfinancial corporations:
 Unit price 1.033 0.000
 Unit labor cost .661 .003
 Unit nonlabor cost .248 .001
 Unit profits from current .124 .002
 production

 Billions of dollars
 (annual rate)
 Change from preceding quarter

 2000

 I II III

Profits from current production 43.1 27.3 7.6
 Domestic industries 34.7 21.9 2.5
 Financial 4.0 -5.5 4.4
 Nonfinancial 30.8 27.3 -1.8
 Rest of the world 8.4 5.4 5.1
 Receipts (inflows) 13.1 12.0 -.7
 Payments (outflows) 4.8 6.5 -5.8

 IVA -5.8 11.4 8.9
 CCAdj -1.0 -5.9 -4.8
 Profits before tax 50.0 21.8 3.5
 Profits tax liability 15.5 5.7 -.1
 Profits after tax 34.5 16.0 3.7

Cash flow from current production 37.7 35.3 19.6

Domestic industry profits:
 Corporate profits of domestic 35.8 27.7 7.4
 industries with IVA
 Financial 4.6 -3.8 5.9
 Nonfinancial 31.1 31.6 1.4

 Dollars

Unit price, costs, and profits
 of nonfinancial corporations:
 Unit price 0.006 0.006 0.002
 Unit labor cost 661 0 .001 .002
 Unit nonlabor cost 248 .002 .002 .001
 Unit profits from current .004 .004 -.002
 production 124

 Percent change (quarterly rate)

 1999 2000

 IV I II III

Profits from current production 6.1 4.8 2.9 0.8
 Domestic industries 5.8 4.5 2.7 .3
 Financial 13.1 2.3 -3.2 2.6
 Nonfinancial 3.9 5.1 4.3 -.3
 Rest of the world 7.6 7.0 4.2 3.8
 Receipts (inflows) 3.0 7.2 6.2 -.4
 Payments (outflows) -5.2 7.8 10.8 -8.1

 IVA ... ... ... ...
 CCAdj ... ... ... ...
 Profits before tax 6.3 5.7 2.4 .4
 Profits tax liability 6.6 5.7 2.0 0
 Profits after tax 6.2 5.7 2.5 .6

Cash flow from current production 3.9 4.0 3.6 1.9

Domestic industry profits:
 Corporate profits of domestic 6.3 4.9 3.6 .9
 industries with IVA
 Financial 12.0 25.0 -2.0 3.2
 Nonfinancial 4.5 5.7 5.5 .2

Unit price, costs, and profits
 of nonfinancial corporations:
 Unit price ... ... ... ...
 Unit labor cost 661 ... ... ... ...
 Unit nonlabor cost 248 ... ... ... ...
 Unit profits from current ... ... ... ...
 production 124

NOTE.--Levels of these and other profits series are shown in NPA tables 1.14, 1.16, 6.16C, and 7.15.

IVA Inventory valuation adjustment

CCAdj Capital consumption adiustment

Profits from the rest of the world increased $5.1 billion (3.8 percent) in the third quarter, as payments by U.S. affiliates of foreign corporations decreased more than receipts of earnings from foreign affiliates of U.S. corporations.(18) Profits of domestic financial corporations increased $4.4 billion (2.6 percent). These increases were partly offset by a $1.8 billion (0.3 percent) decrease in profits of domestic nonfinancial corporations. Unit profits of these corporations decreased, as unit costs increased more than unit prices; the real product of these corporations increased 1.2 percent (or 4.7 percent at an annual rate).

Cash flow from current production, a profits-related measure of internally generated funds available for investment, increased $19.6 billion after increasing $35.3 billion.(19) The ratio of cash flow to nonresidential fixed investment--an indicator of the share of the current level of investment that could be financed by internally generated funds--decreased from 74.3 percent to 73.9 percent, its lowest level since 1986.

Domestic industry profits and related measures.--Domestic industry profits increased $7.4 billion after increasing $27.7 billion.(20) Profits of domestic nonfinancial corporations increased $1.4 billion after increasing $31.6 billion. Profits of manufacturing and of the transportation and utilities group turned down. Profits of "other nonmanufacturing" of wholesale trade, and of retail trade increased less than in the second quarter.(21) Profits of domestic financial corporations increased $5.9 billion after decreasing $3.8 billion.

Profits before tax (PBT) increased $3.5 billion after increasing $21.8 billion. For the third quarter, the difference between the increase in PBT and the increase in profits from current production reflected an increase in the inventory valuation adjustment that was partly offset by a decrease in the capital consumption adjustment.(22)

Government Sector

The combined current surplus of the Federal Government and of State and local governments--the NIPA measure of net saving by government--increased $17.4 billion, to $318.5 billion, in the third quarter after increasing $13.2 billion in the second (table 11).(23) The Federal Government current surplus increased more than in the second quarter, while the State and local government current surplus increased less.(24)

Table 11.--Government Sector Current Receipts and Expenditures

[Billions of dollars, seasonally adjusted at annual rates]

 Change from
 preceding
 Level quarter

 2000 1999

 III III IV

Current Receipts 3082.9 57.5 83.2
Current expenditures 2764.5 18.4 67.8

 Current surplus or deficit(-) 318.5 39.2 15.3

Social insurance funds 111.1 8.6 8.4
Other 207.4 30.7 6.8
 Federal Government

 Current Receipts 2090.4 40.7 50.7

Personal tax and nontax receipts 1030.7 25.2 24.5
Corporate profits tax accruals 250.5 2.9 14.5
Indirect business tax and nontax accruals 109.1 2.5 2.5
Contributions for social insurance 700.1 10.0 9.2

 Current expenditures 1836.1 10.9 54.6

Consumption expenditures 489.9 11.1 15.7
 National defense 319.6 10.0 12.5
 Nondefense 170.3 1.1 3.2
Transfer payments (net) 785.0 2.2 12.7
 To persons 773.8 3.0 2.9
 To the rest of the world 11.3 -0.9 9.8
Grants-in-aid to State and local governments 251.2 12.6 4.8
Net interest paid 257.5 -4.9 -4.0
Subsidies less current surplus of government 52.5 -10.2 21.8
 enterprises
 Subsidies 58.6 -9.8 22.4
 Of which Agricultural subsidies 35.7 -9.9 22.5
 Less: Current surplus of government 6.1 0.4 0.6
 enterprises
Less: Wage accruals less disbursements 0 0 0

 Current surplus or deficit (-) 254.3 29.8 -4.0

Social insurance funds 111.5 8.7 8.5
Other 142.8 21.1 -12.5

 State and local governments

 Current Receipts 1243.8 29.5 37.3

Personal tax and nontax receipts 277.4 5.4 8.9
Corporate profits tax accruals 41.4 0.4 2.2
Indirect business tax and nontax accruals 663.8 11.1 21.4
Contributions for social insurance 10.0 -0.1 0
Federal grants-in-aid 251.2 12.6 4.8

 Current expenditures 1179.6 20.0 18.1

Consumption expenditures 925.7 15.9 14.3
Transfer payments to persons 269.6 4.8 4.0
Net interest paid -4.9 -0.6 -0.3
Less: Dividends received by government 0.4 0 0
Subsidies less current surplus of government -10.4 0 0.1
 enterprises
 Subsidies 0.5 0 0
 Less: Current surplus of government 10.9 0 0
 enterprises
Less: Wage accruals less disbursements 0.0 0 0

 Current surplus or deficit (-) 64.2 9.4 19.2

Social insurance funds -0.4 -0.1 -0.1
Other 64.6 9.6 19.3

 Addendum: Net lending or net borrowing(1)

Net lending or net borrowing (-) 230.4 36.4 5.9
 Federal government 241.4 27.0 -4.1
 State and local government -11.0 9.4 10.0

 Change from preceding
 quarter

 2000

 I II III

Current Receipts 83.0 62.8 47.3
Current expenditures 5.1 49.6 30.0

 Current surplus or deficit(-) 77.9 13.2 17.4

Social insurance funds 3.4 -2.5 7.5
Other 74.6 15.6 10.0

 Federal Government

 Current Receipts 70.9 42.9 35.6

Personal tax and nontax receipts 39.8 25.6 27.1
Corporate profits tax accruals 13.4 4.8 0
Indirect business tax and nontax accruals 2.9 2.1 0.2
Contributions for social insurance 14.9 10.3 8.3

 Current expenditures -21.7 37.9 22.2

Consumption expenditures -8.3 20.3 -9.1
 National defense -13.5 14.5 -6.1
 Nondefense 5.2 5.8 -3.0
Transfer payments (net) 5.5 15.8 6.0
 To persons 16.1 15.0 3.9
 To the rest of the world -10.6 0.8 2.2
Grants-in-aid to State and local governments -3.8 5.9 10.3
Net interest paid 3.2 -4.7 -2.8
Subsidies less current surplus of government -18.2 0.5 17.9
 enterprises
 Subsidies -16.9 0.8 17.5
 Of which Agricultural subsidies -16.8 0.8 17.4
 Less: Current surplus of government 1.3 0.3 -0.4
 enterprises
Less: Wage accruals less disbursements 0 0 0

 Current surplus or deficit (-) 92.5 5.1 13.4

Social insurance funds 3.3 -2.5 7.4
Other 89.3 7.6 5.9

 State and local governments

 Current Receipts 8.3 25.8 22.1

Personal tax and nontax receipts 2.2 12.2 3.8
Corporate profits tax accruals 2.1 0.9 -0.1
Indirect business tax and nontax accruals 7.6 6.5 8.1
Contributions for social insurance 0.2 0.2 0.1
Federal grants-in-aid -3.8 5.9 10.3

 Current expenditures 22.9 17.7 18.0

Consumption expenditures 20.1 13.8 14.4
Transfer payments to persons 3.1 4.0 4.0
Net interest paid -0.6 -0.4 -0.3
Less: Dividends received by government 0 0 0
Subsidies less current surplus of government 0.3 0.2 0.0
 enterprises
 Subsidies 0 0 0
 Less: Current surplus of government -0.3 -0.2 0.0
 enterprises
Less: Wage accruals less disbursements 0 0 0
 Current surplus or deficit (-) -14.6 8.1 4.1
Social insurance funds 0.1 0.1 0
Other -14.7 8.1 4.0
 Addendum: Net lending or net borrowing(1)
Net lending or net borrowing (-) 70.3 20.5 17.9
 Federal government 92.7 2.6 14.5
 State and local government -22.4 17.9 3.4

(1.) "Net lending or borrowing" is conceptually similar to "net financial investment" in the flow-of-funds accounts prepared by the Board of Governors of the Federal Reserve System. The two measures differ primarily because government net lending or borrowing is estimated from data for transactions, whereas net financial investment is estimated from data for financial assets. There are also small conceptual differences, such as the classification of the Federal Government's railroad retirement and veterans life insurance programs.

Federal

The Federal Government current surplus increased $13.4 billion, to $254.3 billion, in the third quarter after increasing $5.1 billion in the second. Current expenditures decelerated more than current receipts.

Current receipts.--Federal current receipts increased $35.6 billion in the third quarter after increasing $42.9 billion in the second. The deceleration was mostly accounted for by a deceleration in corporate profits tax accruals, but decelerations in contributions for social insurance and in indirect business tax and nontax accruals also contributed. In contrast, personal tax and nontax receipts accelerated.

Corporate profits tax accruals were unchanged after increasing $4.8 billion, reflecting a deceleration in domestic corporate profits before tax.

Contributions for social insurance increased $8.3 billion after increasing $10.3 billion. The deceleration primarily reflected a deceleration in contributions for social security (old-age, survivors, disability, and health insurance), which increased $7.4 billion after increasing $9.8 billion.

Indirect business tax and nontax accruals increased $0.2 billion after increasing $2.1 billion. The deceleration was more than accounted for by a deceleration in customs duties, which increased $0.2 billion after increasing $2.4 billion.

Personal tax and nontax receipts increased $27.1 billion after increasing $25.6 billion. Receipts from income taxes increased $27.0 billion after increasing $25.5 billion. The acceleration was more than accounted for by "estimated income tax payments and final settlements, less refunds," which increased $7.6 billion after increasing $4.4 billion.

Current expenditures.--Current expenditures increased $22.2 billion in the third quarter after increasing $37.9 billion in the second. The deceleration was more than accounted for by a downturn in consumption expenditures and a deceleration in "transfer payments (net)." In contrast, "subsidies less current surplus of government enterprises" accelerated.

Consumption expenditures decreased $9.1 billion after increasing $20.3 billion. The downturn was mostly accounted for by defense consumption expenditures, which decreased $6.1 billion after increasing $14.5 billion; within defense consumption expenditures, the downturn was more than accounted for by a downturn in "other" services.(25)

Nondefense consumption expenditures also contributed to the downturn in consumption expenditures. Nondefense consumption expenditures decreased $3.0 billion after increasing $5.8 billion; the downturn was more than accounted for by employee compensation. Employee compensation decreased $3.7 billion after increasing $4.1 billion, reflecting lower employment levels at the Bureau of the Census after the departure of most of the temporary workers hired for Census 2000.

"Transfer payments (net)" increased $6.0 billion after increasing $15.8 billion. Transfer payments to persons increased $3.9 billion after increasing $15.0 billion; the deceleration was more than accounted for by a downturn in benefit payments for social security (old-age, survivors and disability insurance), which decreased $0.8 billion in the third quarter after increasing $12.4 billion in the second. The second-quarter increase included payments of $9.2 billion (annual rate) as a result of the new Senior Citizens' Freedom to Work Act of 2000.(26)

"Subsidies less current surplus of government enterprises" increased $17.9 billion after increasing $0.5 billion. The acceleration was mostly accounted for by agricultural subsidies, which increased $17.4 billion after increasing $0.8 billion; the third-quarter increase reflects large special payments to farmers that resulted from the Agricultural Risk Protection Act of 2000.

State and local

The State and local government current surplus increased $4.1 billion, to $64.2 billion, in the third quarter after increasing $8.1 billion in the second. Current receipts decelerated and current expenditures accelerated.

Current receipts.--State and local government current receipts increased $22.1 billion after increasing $25.8 billion. The deceleration was mostly accounted for by a deceleration in personal tax and nontax receipts, but a downturn in corporate profits tax accruals also contributed. In contrast, Federal grants-in-aid and indirect business tax and nontax accruals accelerated.

Personal tax and nontax receipts increased $3.8 billion after increasing $12.2 billion. The deceleration was accounted for by personal income taxes, which increased $3.0 billion after increasing $11.5 billion.

Corporate profits tax accruals decreased $0.1 billion after increasing $0.9 billion. The downturn reflected a downturn in domestic corporate profits before tax.

Federal grants-in-aid increased $10.3 billion after increasing $5.9 billion. The acceleration was mostly attributable to a step-up in grants for medicaid.

Indirect business tax and nontax accruals increased $8.1 billion after increasing $6.5 billion. The acceleration was accounted for by sales taxes, which increased $4.2 billion after increasing $2.4 billion; within sales taxes, general sales taxes accelerated, reflecting stronger general retail sales in the third quarter.

Current expenditures.--Current expenditures increased $18.0 billion after increasing $17.7 billion.

Consumption expenditures increased $14.4 billion after increasing $13.8 billion. The acceleration was more than accounted for by nondurable goods, which increased $3.4 billion after increasing $2.5 billion; within nondurable goods, petroleum products accelerated.

Net lending or net borrowing

"Net lending or net borrowing(-)" is an alternative measure of the Government fiscal position. Net lending is the financing requirement of the government sector and is derived as the current surplus plus the consumption of fixed capital and "capital transfers received (net)" less gross investment and net purchases of nonproduced assets.

Net lending increased $17.9 billion after increasing $20.5 billion. The deceleration was attributable to a deceleration in State and local government net borrowing, reflecting an upturn in gross investment and a deceleration in the current surplus. Federal Government net lending accelerated.

Gross investment increased $1.7 billion after decreasing $2.3 billion.(27) The upturn was attributable to State and local government grss investment, which increased $2.7 billion after decreasing $6.5 billion, reflecting a turnaround in structures.

(1.) Quarterly estimates in the NIPA's are expressed at seasonally adjusted annual rates. Quarter-to-quarter dollar changes are the differences between the published estimates. Quarter-to-quarter percent changes are annualized and are calculated from unfounded data unless otherwise specified.

Real estimates are calculated using a chain-type Fisher formula with annual weights for all years and quarterly weights for all quarters; real estimates are expressed both as index numbers (1996=100) and as chained (1996) dollars. Price indexes (1996=100) are also calculated using a chain-type Fisher formula.

(2.) In the NIPA's, business investment in equipment and software and in structures is shown as private nonresidential fixed investment, private inventory investment is shown as change in private inventories, and government spending is shown as government consumption expenditures and gross investment.

(3.) In the NIPA's, consumer spending is shown as personal consumption expenditures.

(4.) Final sales of domestic product is calculated as GDP less change in private inventories.

(5.) Gross domestic purchases--a measure of purchases by U.S. residents regardless of where the purchased goods and services were produced--is calculated as the sum of personal consumption expenditures, gross private domestic investment, and government consumption expenditures and gross investment; thus, gross domestic purchases includes imports of goods and services, which are subtracted in the calculation of GDP, and does not include exports of goods and services, which are added in the calculation of GDP.

(6.) The personal saving rate is measured as personal saving as a percentage of current-dollar disposable personal income.

(7.) The national saving rate is measured as gross saving as a percentage of gross national product.

(8.) "Other" durable goods includes jewelry and watches, ophthalmic products and orthopedic equipment, books and maps, bicycles and motorcycles, guns and sporting equipment, photographic equipment, boats, and pleasure aircraft.

(9.) "Other" nondurable goods includes tobacco, toilet articles, drug preparations and sundries, stationery and writing supplies, toys, film, flowers, cleaning preparations and paper products, semidurable house furnishings, and magazines and newspapers.

(10.) "Other" services includes personal care, personal business, education and research, religious and welfare activities, and net foreign travel.

(11.) "Other information processing equipment" includes communication equipment, instruments, photocopy and related equipment, and office and accounting equipment.

(12.) "Other" residential structures includes home improvements, new manufactured home sales, brokers' commissions on home sales, and other residential structures (which consists primarily of dormitories and of fraternity and sorority houses).

(13.) "Other" nonfarm industries include mining; construction; public utilities; transportation; communication; finance, insurance, and real estate; and services.

(14.) Use of the ratio that includes all final sales of domestic businesses in the denominator implies that the production of services results in a demand for inventories that is similar to that generated in the production of goods and structures. In contrast, use of the "goods and structures" ratio implies that the production of services does not generate demand for inventories. Both implications are extreme. Production of some services may require substantial inventories, while production of other services may not.

(15.) "Other" private services includes education; financial services; telecommunications; insurance; and business, professional, and technical services.

(16.) "Other services" includes contractual research and development, installation support, weapons support, personnel support, transportation of material, and travel of persons.

(17.) Profits from current production is estimated as the sum of profits before tax, the inventory valuation adjustment, and the capital consumption adjustment; it is shown in NIPA tables 1.9, 1.14, 1.16, and 6.16C (see "Selected NIPA Tables" which begins on page D-2 of this issue) as corporate profits with inventory valuation and capital consumption adjustments.

Percent changes in profits are shown at quarterly, not annual, rates.

(18.) Profits from the rest of the world is calculated as (1) receipts by U.S. residents of earnings from their foreign affiliates plus dividends received by U.S. residents from unaffiliated foreign corporations minus (2) payments by U.S. affiliates of earnings to their foreign parents plus dividends paid by U.S. corporations to unaffiliated foreign residents. These estimates include capital consumption adjustments (but not inventory valuation adjustments) and are derived from BEA's international transactions accounts.

(19.) Cash flow from current production is undistributed profits with inventory valuation and capital consumption adjustments plus the consumption of fixed capital.

(20.) Domestic industry profits are estimated as the sum of corporate profits before tax with the inventory valuation adjustment; they are shown in NIPA table 6.16C (on page D-17 of this issue). Estimates of the capital consumption adjustment do not exist at a detailed industry level; they are available only for total financial and total nonfinancial industries.

(21.) "Other nonmanufacturing" industries include agriculture, mining, construction, and services.

(22.) As prices change, companies that value inventory withdrawals at original acquisition (historical) costs may realize inventory profits or losses. Inventory profits--a capital-gains-like element in profits--result from an increase in inventory prices, and inventory losses--a capital-loss-like element in profits--result from a decrease in inventory prices. In the NIPA's, inventory profits or losses are removed from business incomes by the inventory valuation adjustment (IVA); a negative IVA removes inventory profits, and a positive IVA removes inventory losses.

The capital consumption adjustment converts depreciation of fixed assets valued at historical cost and based on service lives and depreciation patterns specified in the tax code to depreciation valued at replacement cost and based on empirical evidence on the prices of used equipment and structures in resale markets. For more information on depreciation in the NIPA's, see Shelby W. Herman, "Fixed Assets and Consumer Durable Goods: Estimates for 1925-98," SURVEY OF CURRENT BUSINESS 80 (April 2000): 17-30.

(23.) Net saving equals gross saving less consumption of fixed capital (CFC); the estimates of gross saving, CFC, and net saving are shown in NIPA table 5.1.

For NIPA estimates of government current receipts, current expenditures, and the current surplus or deficit for 1998 and 1999, see NIPA tables 3.1, 3.2, and 3.3 in this issue.

(24.) The NIPA estimates for the government sector are based on financial statements for the Federal Government and for State and local governments, but they differ from them in several respects. For the major differences, see NIPA tables 3.18B on page 13 and 3.19 on page 14 of the October 2000 Survey.

(25.) "Other" services includes services for research and development, for installation support, and for personnel support.

(26.) This act--which was signed into law April 7, 2000, and was effective retroactive to January 1, 2000--eliminated the "retirement earnings test" for beneficiaries aged 65 and older, allowing them to receive full benefits regardless of their earnings. Previously, benefits had been reduced $1 for every $3 earned over the annual earning limit, which was $17,000 in 2000.

(27.) For NIPA estimates of government gross investment, see NIPA table 3.7 in this issue.